July 16, 2007 — In a recent meeting, Hovensa management updated Gov. John deJongh Jr. and several cabinet members on various topics, including gas prices, ongoing plant capital projects, environmental concerns and future partnerships between the refinery and the government.
The gathering took place last Wednesday at the south shore oil refinery. A news release issued Monday by Hovensa gave details of the meeting. During the briefing, Hovensa President and Chief Operating Officer Larry Kupfer touched on a subject of concern to many V.I. residents: the high price of gas.
Kupfer used a graphic presentation to demonstrate that the price of Hovensa's regular gasoline to station owners on St. Croix was below the average U.S. price every month in 2006, based on U.S. Department of Energy data. For the present year, Kupfer said gas prices were also below the average U.S. price through April.
Hovensa sells fuel to WAPA at below-market prices according to the current agreement with the government, Kupfer noted, according to the release.
"As a result of this formula, WAPA saved approximately $30 million in the cost of fuel in 2006 compared to what it would have paid based on market prices," he said, adding, "Despite this substantial saving, WAPA’s power rate was higher than rates on the U.S. mainland.”
Kupfer attributed the higher rate to WAPA's use of petroleum liquids as its sole source of energy to produce electric power.
"Only 2 percent of electric power in the U.S. is generated by petroleum liquids-fired plants; 50 percent of power in the U.S. was generated by coal-fired plants," he said. "DOE data indicates that the average price paid by electric power generators for petroleum liquids through February was $8.10 per million BTU compared to $1.76 for coal — almost five times higher than the price of coal.”
Government Contributions and Plant Capital Projects
Kupfer outlined Hovensa's contribution to the V.I. government, saying the refinery generated approximately $161 million in tax revenues in 2006, which includes $14 million in real property taxes and $102 million in corporate income taxes by refinery owners and contractors.
"The government gets almost 40 percent of what Hovensa earns, and the owners of the company each get approximately 30 percent," Kupfer said in the release.
Several capital improvements are presently ongoing in the refinery, Kupfer said. These include a new laboratory at $12 million, a low-sulfur gasoline unit at $195 million, a gas-turbine power generator at $83 million and Phase II of a wastewater treating unit at $93 million.
Three of the four projects will be completed this year and one is scheduled for completion next year, Kupfer said.
Environmental Concerns
Dick Smullen, Hovensa vice president of Environmental, Health and Safety, updated deJongh on the program to recover hydrocarbon found in groundwater under the refinery. The source of the hydrocarbon was leaking above-ground storage tanks and oily underground sewer lines. It was discovered in 1982 while the plant was operated by its previous owner, Hess Oil Virgin Islands Corp (HOVIC), Smullen said.
HOVIC "established a system to recover the groundwater, treat it to remove and recycle the oil, and thermally treat and destroy all vapors," Smullen said. When Hovensa became the refinery owner in 1998, it continued the program, he said.
Presently "more than 90 percent of the hydrocarbon has been recovered," Smullen said. The program is continuing, and periodic written reports are being submitted to the EPA and the DPNR, he said, adding that tests show "no hydrocarbon has migrated to property outside the refinery."
Government Partnerships
DeJongh asked Hovensa officials if there was a possibility of an electrical interconnection between the refinery and WAPA. Alex Moorhead, Hovensa vice president, replied that the plant does not have enough power-generation capacity to supply power to WAPA, adding that the plant is presently installing a new 25-megawatt gas-turbine power generator.
"This generator will make it possible for Hovensa to resume its normal standard of having enough power-generation capacity in order to maintain sufficient 'spinning reserve' on the operating generators to pick up additional load if one generator fails, while one generator is out of service for maintenance," Moorhead said.
Labor Commissioner Albert Bryan Jr. proposed a partnership between Hovensa and the Department of Labor (DOL), using federal funds to prepare local residents to pass the screening test for employment as operators or craftsmen.
Hovensa has funded such remedial training in the past, said Joe Hazewski, Hovensa vice president of maintenance and controls, but those programs have not been successful enough for "a substantial number of persons to pass the screening tests for entry-level jobs."
Despite the lack of success of such programs in the past, Hovensa is willing to consider a proposal from the DOL, Moorhead said, according to the release.
Safety Records
"Hovensa is a safe place to work," Kupfer said. The plant had an OSHA “recordable injury rate” of 0.6 per 100 employees in 2006. These figures are better than the U.S. refining industry average injury rate, which was 0.8, and four times better than the average recordable injury rate of all industries in the U.S., which was 2.4, he said.
Based on recent data, Kupfer said Hovensa is the 11th-largest refinery in the world, the fourth largest in the western hemisphere and the third largest in the U.S. Hovensa has a capacity of 500,000 barrels per day, while the largest U.S. refinery has a 563,000-barrels-per-day capacity.
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